At the Mix08 keynote, Microsoft Chief Software Architect Ray Ozzie framed the big picture of what Microsoft is doing, and gave some hints as to the 2008 roadmap.  This is a long post but it was a big talk with lots of structure, so bear with me:

Two aspects to Microsoft's strategy

At the highest level, he described two main aspects of Microsoft's strategy: first, he talked about how Microsoft is deeply embracing advertising (!) and second, Ray talked about how the Internet is changing Microsoft. 

One, on the advertising side, his main point was empowering what he called "innovation in the experiences on the web that provide the fuel for our ad-based economic engine".  Decoding some of that Microspeak, he's basically talking about links, tags, Digg (yes he actually said Digg), chats, discussion groups - basically, the highly engaging world of social commerce and media.  He sees Microsoft's role as "doing our part and using the resources we have to ensure a vibrant ad ecosystem on the web".  To that end, they are significantly investing in search, content, commerce and community innovation.  He left it pretty much at that, though he bracketed it by saying he couldn't really discuss the Yahoo deal too much, so it seems logical that Yahoo is a big part of this.

Second, he talked about how web impacts Microsoft, and that was the much more substantive portion of the talk.

Three core principles driving the evolution of Microsoft's software

He framed Microsoft's strategy under three core principles to drive the re-conceptualization of Microsoft's software:

ONE: Individuals: Think of the web as a hub of social, technical, device mesh impacting the individual. In this model, according to Ozzie:

"Link", "Share" and "Tag" will become the new "File", "Edit" and "View". 

along with this, he prophesied the death of "My Computer". That's probably an exaggeration but his point was that individuals will see their data as part of "the cloud" rather than stored on their PC.

TWO: Businesses: The main point here was about the impact on business as enterprises move to embrace the cloud. Most enterprises are in the very early stages of transition, from dedicated app-specific servers to virtualization - this includes such technology as compute grids, data fabrics, server and storage virtualization, and utility computing.  These technologies will reshape enterprise infrastructure as well as the apps that we as developers build on top of it. "the power of choice in the enterprise". 

THREE: Developers: For developers, he says they need to embrace a world of small pieces loosely joined - from the handheld device at one extreme to the cloud at the other.  This means a transition from tightly coupled systems to loosely coupled compositions and federations of cooperating systems.  To this end:

Transparency, standards, and interoperability are the key.

(Boy is that a sea change from the old Microsoft huh?)  Here he talked about the power of rss and atom, and how xaml allows developers to recombine bits into varied applications.  On the device end, they see that users are expecting rich experiences that are consistently delivered, they don't just want web applications ported to handhelds, but applications that take advantage of the unique strengths of each platform.  On the cloud side, new programming models are evolving, such as MapReduce (yes, he actually said "MapReduce"!) that are more appropriate to the cloud.  The way we develop applications for mass scale will be transformed.

Five groupings - how Microsoft sees their products in this new world

So, bracketed by those principles, Ray then discussed how specifically Microsoft's products will evolve and outlined it according to 5 major groupings - Connected Devices, Entertainment, Productivity, Business, and Development:

1. Devices:  This is all about unified device management, centralized personalization and configuration, and transparent synchronization.  He teased a technology preview coming of new products in this space from Microsoft in 2008 but gave no details.
2. Entertainment: His vision here is that individuals will only need to license their content once, and organize their content once, then use all their devices to consume it wherever and however they like. Each individual will have a media-centric presence to express their preferences and to do their linking, tagging, and messaging.  The key to this will be their sites such as XBox Live, Zune.net and Zune Social, as well as Microsoft TV and Media Center.  These will all be transformed by connected entertainment.  No details again.
3. Productivity:  At its core this means Office for the PC, Office Mobile for phone, and Office Live for the web.  For all 3, individuals should be able to seamlessly enjoy the benefits of rich editing on the PC, the picture capturing and remote access ability of the phone, and the ubiquity of the web.  It's a pretty compelling idea actually.  He said Office Live will extend PC-based scenarios into the interpersonal and social, such as linking, sharing, and tagging of documents. He announced that Office Live Workspace just went into public beta yesterday. And for all this, more specifics to come over 2008.
4. Business: Mainly he described this as CRM and CRM-derived solutions. Small firms are now enjoying capabilities that were only in the enterprise.  Dynamics CRM now has over 500,000 small businesses using it.  Ozzie said that the greatest impact of this comes not from what he called "rapid solution environments" (anyone know what that means in English?), but rather from the inevitable shift towards utility computing.  This shift will occur on a number of levels.  At the lowest level - the operating environment - Microsoft is rolling out Windows Server 2008, System Center and VM Manager.  He promised more specifics to come over 2008.  At a much higher level - finished services - he mentioned their "Online Business Services" which were just released into open beta last Monday.  These are hosted versions of Exchange, SharePoint, and Office Live for rent.  (Question: how does this impact the ISP's within the Microsoft partner community?). At the level of what he called "building blocks", last June, they rolled out BizTalk Services for application integration, and here at MIX they will be introducing something he called SQL Server Data Services which, he says, will bring the benefits of SQL Server to the cloud.  Hmm.. sounds intriguing, interested to see what that actually means.  There will be a session on it here so perhaps I'll learn more about it then.
5. Development: A platform and tools that scale from the data center to the cloud and from the the browser to the PC to the phone. Ozzie said Microsoft is realizing this vision through .NET and Silverlight, Expression Studio & Visual studio.  He threw this one over to Scott Guthrie to expand on. 

Ray's summary statement was, "you have a lot of choices - I'd like you to bet on us".  As you see throughout the talk, he took pains to emphasize the open nature of Microsoft, and I think this last statement sums up that attitude nicely.  Those of us that have worked closely with Microsoft through the years have certainly seen this shift from closed to open over the past 5-6 years or so; it's great to see it make its way into their core strategy.  There are many out there who still think of Microsoft as closed, monopolistic, predatory, and territorial; it will take a lot of these types of initiatives to change people's minds, but it's a very worthwhile effort.

Oh yeah, and for you geeks out there, Ray said his favorite new .NET language was Iron Ruby :-)